DAILY Fundamental Forex Market Overview
30 December 2010 – 8:00 GMT
Thursday
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Market Analysis Desk
Foreign Exchange Research: www.fibosignals.com/5585/resources.html
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FUNDAMENTAL ANALYSIS at 0800 GMT
USD
A continuation of the holiday mood and the general absence of news-flow kept FX trading activity subdued over the past 24 hours. EURUSD traded 1.3084-1.3275, and USDJPY traded 82.93-81.82. Weaker US data led to a modest uptick in risk aversion, which helped support the dollar and the other safe havens like the Swiss franc and the yen. USDCHF hit a new record low of 0.9435 yesterday and EURCHF remains close to its all-time low, trading at 1.2485 at the time of writing. US consumer confidence fell to 52.5 in December (cons. 56.0), with both the current conditions and the expectations sub-components registering declines. The S&P/Case-Shiller index showed home prices fell at a faster than expected pace of -1.0% m/m in October (cons. -0.6%). However, the Richmond Fed manufacturing survey rose strongly in November to 25 (cons. 11).
EUR
ECB Governing Council member Mersch said recent proposals to reform the Eurozone's economic governance do not go far enough, and that he would prefer to see excessive deficit procedures triggered more quickly and "quasi-automatically".
The ECB failed to take in enough one-week deposits to fully sterilize the bonds it has purchased through the Securities Market Program. The ECB auctioned ?73.5 bn in deposits, but ultimately only managed to drain ?60.784 bn. This is the second time the ECB failed to attract enough deposits in its weekly sterilization operations. In late June, banks were also reluctant to part with one-week money due to the imminent expiry of the ECB's first and largest 12m tender. This week however, the desire to hold liquidity over the transition to a new year appears to have been the root cause. Hence, we do not see any significant risks to the euro from this news; were it to become a more common occurrence, that would be a different matter. Several consecutive failures could raise questions in the minds of investors about the nature of the ECB's bond buying program, and specifically whether it is a form of quantitative easing.
A. M. Negrin Bautista, CFA
Chief Analyst at Fibosignals.com
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